Since 2007, Bridgeport-based Aquarion Water Co. has overpaid $29 million in taxes because of changes in federal accounting regulations, state officials announced Tuesday.

As a result, the company will cut water rates by 5.6 percent for three years beginning in January. The reduction amounts to a credit to customers for the total income tax refund, officials said.

The settlement was reached following deliberations with Connecticut's Consumer Counsel, which protects utility ratepayers, and Attorney General George Jepsen.

"This is a very positive result for Aquarion's customers," said Consumer Counsel Elin Swanson Katz. "They will see nearly $10 million in bill credits annually over the next three years, which will make a noticeable difference in customers' bills."

Aquarion President Charles Firlotte said the company remains "committed to providing our customers with the highest quality water and outstanding service."

The tax refund also means that Aquarion will be delaying its next planned general rate case, officials said.

"We are pleased to be able to delay our next scheduled application to the Public Utilities Regulatory Authority," Firlotte said. "In the interim, we will continue to make prudent investments to improve and maintain the integrity of our system's infrastructure."

Last July, Bethel residents voted overwhelmingly to reject the offer of Aquarion to buy the town-owned Bethel Water Co. for $7.2 million. The local water company services the downtown area, and the town would have been able to use $2 million to offset the water company debt, with the rest going for necessary upgrades.

In 2012, Aquarion purchased the United Water Co., which served 21,000 residents in the Stony Hill section of Bethel, as well as Brookfield, Newtown, New Milford and Woodbury. The same year, the company purchased the Bethel-based Meckauer Water Co.

"Half of the town of Bethel is serviced by Aquarion, so it's great news for the residents in the Stony Hill area,'' Bethel First Selectman Matt Knickerbocker said Tuesday.

In all during 2011-12, Aquarion bought 56 water companies in Connecticut.